Once a platform decides its merchants need working capital, the harder question isn’t whether to offer credit. It’s who to offer it with. Most prospective lending partners promise fast approvals and a seamless merchant experience. But the differences that matter aren’t always obvious from the initial pitch.
An NBFC partner sits inside your merchant relationship for as long as the arrangement runs. The approval decision and the collections call are made by someone else, and your merchants experience both as part of your platform. You don’t need to be a lending expert to ask these questions, but you do need specific answers.
Key Takeaways
- Check registration and permitted lending activity against RBI’s list, then judge the lender on merchant-lending experience rather than size.
- Get the credit policy in writing before launch. Platform data can help assess a thin-file merchant, but the lender decides.
- Settle who funds the loans, who carries default risk, who sets pricing, how you are paid, and whether a Default Loss Guarantee applies.
- Collections and reporting shape the merchant relationship after launch, so agree conduct, visibility and notice terms upfront.
Is the NBFC Registered, and What Has It Lent?
Ask for the Certificate of Registration number and check it against RBI’s list of registered NBFCs. Registration isn’t blanket permission: an NBFC is registered in a category and some activities need separate approval, so confirm the lending it proposes sits inside that category.
An NBFC’s regulatory layer under RBI’s Scale Based Regulation framework reflects its size, activities and supervisory requirements. It doesn’t tell you whether the lender is right for your merchant profile. A large NBFC may have little appetite for small unsecured loans, while a smaller NBFC with proven experience in merchant lending may be the better operational fit.
So ask how long it has lent to businesses like your merchants, in what ticket range, how that portfolio has performed, and who runs lending operations. If the journey runs through an app, check RBI’s Digital Lending Apps directory. A listing shows a lender reported it, not that RBI approves it.
Does the Lender’s Credit Policy Fit Your Merchants?
A credit policy decides who gets through, and most friction comes from learning it one merchant at a time after launch.
Get it in writing: business vintage and whether trading history on your platform counts towards it, turnover floors and ceilings, ticket sizes and how a limit is set, live states and cities, and what happens with a thin or absent bureau file.
Then ask about data. A bureau score shows how a merchant has handled formal credit, not whether their orders have grown or invoices get paid on time. If your platform holds that history, ask whether the underwriting model can use it, and at what point in the decision. Transaction data can help a lender assess a merchant whose formal credit history is limited, but it doesn’t guarantee approvals, better pricing or larger limits. The lender sets its risk appetite and owns the decision.
Who Funds, Who Carries the Risk, and Who Sets the Price?
Funding and Risk
In most embedded arrangements the regulated NBFC funds the loan off its own book and carries the default risk, while your platform facilitates access and shares data under agreed permissions. Risk allocation can also be shaped by contract: some arrangements include a Default Loss Guarantee, where an eligible provider covers a defined share of losses on a named portfolio, subject to RBI requirements.
Commercially, what matters is the 5% cap on cover against the amount disbursed from that portfolio, and the three permitted forms: cash with the lender, a fixed deposit under lien, or a bank guarantee in its favour. Under RBI’s rules, an NBFC may enter a DLG arrangement with an LSP or another lender acting as an LSP.
A platform can provide DLG only if it meets RBI’s eligibility requirements, including acting as an LSP in the arrangement and being incorporated as a company under the Companies Act, 2013. The rules are in Chapter III of RBI’s Non-Banking Financial Companies – Credit Facilities Directions, 2025, as amended. A DLG ties up cash or bank-guarantee capacity, so weigh it against the commercial return.
Pricing and What You Earn
The lender is responsible for the rate and every charge a borrower pays, though the band and how risk tiers map to rates are negotiable. Where your platform acts as a lending service provider, its fees come from the lender, not the merchant, so ask how you get paid and whether it tracks volume or portfolio performance.
Disbursement goes to the borrower’s own account and repayment directly to the lender, with narrow exceptions in the Directions. Routing merchant money through your platform isn’t one of them.
What Does the Merchant Actually Go Through?
Ask to walk the real merchant screens on a live or sandbox build.
Settle where the journey runs and whose brand the merchant sees. It can be built natively into your product, co-branded, presented under your branding as a white-label flow, or completed on the lender’s hosted pages, and these overlap rather than being fixed categories.
Then establish who owns each step:
- KYC collection and verification, and whether anything you hold can be reused
- Whether credit decisions are automated or reviewed above a threshold
- How the agreement and Key Fact Statement reach the merchant and get signed
- How disbursement and repayment work when a mandate fails.
Integration effort depends on the lender’s technology and your existing systems, so a published timeline means little on its own. Ask for numbers from completed integrations, including ones that ran long. Ask too what happens when a disbursement fails after approval: who notices, what the merchant is told, and whether a manual fallback has a named owner.
What Happens When a Merchant Falls Behind?
Some merchants will miss payments, and a collections call lands on a relationship you spent years building.
Ask who makes contact and at what hours, whether collections are in-house or through an agency, what reminders a merchant gets before and after a due date, whether you are told too, and whether you can flag a merchant with a genuine dispute.
Under the Credit Facilities Directions the lender must send a recovery agent’s particulars to the borrower before contact. The lender remains responsible for regulatory compliance, including the conduct of its LSPs. The arrangement must also provide borrowers with clear grievance-redressal channels and applicable escalation options. Regulatory accountability sits with the lender; the reputational effect can still land on you.
What Do You Get After Launch?
Ask what you will see after launch, and how often: applications, approvals, declines and disbursements; amounts outstanding and overdue; and what you need to reconcile your records against the lender’s. Sharing borrower-level information is governed by applicable regulatory and data-protection requirements, borrower consent and your contract, so agree which fields you receive before launch.
Also agree on notice periods for changes to the lender’s credit policy or pauses in new lending, what happens to applications in progress and undrawn limits, and who communicates these changes to merchants.
How GLAAS Is Structured
GLAAS brings together the technology, lending capital and operations needed for embedded merchant credit, including loan servicing and collections. Gromor Finance, its RBI-licensed NBFC, acts as the regulated lender and is responsible for credit decisions, loan funding and regulatory compliance.
The partner platform continues to manage its merchant relationships and makes the credit offering available within its existing experience. Under the permissions and data-sharing terms agreed between the parties, its transaction history can feed into the underwriting. The exact division of responsibilities depends on the arrangement.
A co-branded, no-code journey can go live in under 2 days and a fully native integration in under 2 weeks, with disbursement within hours of approval. GLAAS has disbursed ₹1,500 Cr+ across 110,000+ loans to 13,000+ MSMEs.
If you’re comparing partners, these are the questions worth putting to us too. Get in touch now.
Frequently Asked Questions
1. Who sets the interest rate a merchant pays?
The lender is responsible for the rate and every charge on the loan. The band and how risk tiers map to rates stay negotiable within the partnership.
2. What should a platform check before sharing merchant data with an NBFC?
What your consent covers, which fields you share, where the data sits and for how long, and what the lender may use it for.
3. What happens if the lender changes its credit policy?
It can, because the policy is the lender’s. Negotiate the notice period, the treatment of applications in flight and undrawn limits, and who tells merchants.
4. What happens to existing borrowers if the partnership ends?
Disbursed loans stay the lender’s asset and the merchant’s obligation, running to their original terms. Wind-down terms are contractual, so agree them upfront.
